UPDATE 1-Marshalls warns on demand, shares plunge

* 10-month sales drop, demand outlook deteriorates

* Sales decline accelerates in last four months

* Shares hit lowest level since 1993

(Adds details, shares, analyst comment)

LONDON, Nov 13 (Reuters) - British building materials company Marshalls Plc (MSLH.L) said on Thursday the demand outlook in a number of its markets has deteriorated in the last two months as the downturn in the UK housing market takes hold. Shares in the company, which makes landscaping products for driveways and gardens and sponsors the Chelsea flower show, plunged 19 percent to 78.75 pence on the news, their lowest level since the last UK housing market slump in 1993.

Marshalls said in a trading statement the 2009 outlook for its public sector operations remains positive but that order books in the Domestic division have fallen.

The company reported 10-month revenues down 3.5 percent to 339 million pounds ($524.3 million), hit by a drop in sales to the domestic market of 13 percent.

The decline in like-for-like sales accelerated sharply in the four months to Oct. 31 at 9.7 percent as distributors cut back on costs and the poor summer weather led to weaker demand for its products.

Marshalls, which is closing two concrete manufacturing operations in Staffordshire and Derbyshire, said it is focusing on further cost reduction efforts and has reduced capacity in a number of its operations.

"We have invested significantly over the past few years in both productivity improvements and acquisitions and this will now enable us to reduce capital expenditure which will improve net cash generation in the future," it said.

In reaction, Panmure lowered its target price on the stock to 140 pence from 185 pence.

"Marshalls' statement reflects worsening trends in both its Domestic and Public Sector & Commercial operations, and demonstrate that the business is not immune to the current slowdown," said the broker in a note. (Reporting by Victoria Bryan; Editing by Rosalba O'Brien)